The United States District Court for the District of New Jersey, applying New Jersey law, held that no coverage was available for a lawsuit because the insured was aware of a counseling incident before the policy’s prior acts date. Drew v. Church Mut. Ins. Co., 2014 WL 2436273 (D.N.J. May 29, 2014).
In 2011, the insured, a priest, was sued for breach of fiduciary duty and negligent infliction of emotional distress by a former parishioner. In 2009, the claimant sought counsel from the priest concerning his marriage, and the priest counseled the claimant not to take efforts to save his marriage and to accept his wife’s decision to seek a divorce. After the counseling session, the claimant learned in 2009 that the priest was having an affair with claimant’s wife and informed the priest of his knowledge of the affair by text message. The priest then fled the United States to avoid service of a potential suit by the claimant but later returned to the United States. The priest tendered the suit to the insurer, and the insurer denied coverage because the priest had knowledge of a counseling incident before the policy’s prior acts date of July 1, 2010.
The policy was an occurrence-based policy that provided coverage for counseling incidents, which were defined as “any act or omission in the performance of counseling services” that took place during the policy period. The policy also provided prior acts coverage for any counseling incident that occurred before the inception of the policy provided that the insured had no knowledge of the “counseling incident” before the policy’s July 1, 2010 prior acts date.
The court held that no coverage was available under the policy because the priest had knowledge of a counseling incident before July 1, 2010. Before July 1, 2010, the insured provided counseling services to the claimant, received a text message from the claimant concerning the affair, informed his superiors of the text message from claimant regarding the affair, and was advised to flee the country to avoid potential service of process. Thus, the court held that the insured’s contention—that he was unaware of a counseling incident until he was served with claimant’s complaint in October 2010—was “unpersuasive.”